Detroit Files For Bankruptcy

3 years ago

DETROIT, July 18 (UPI) -- The City of Detroit filed for bankruptcy Thursday in federal court, trying to get out from under billions in debt.

If approved it would be the largest city bankruptcy in U.S. history.

The filing was under what is called Chapter 9 of the U.S. code, which allows municipalities to restructure debt under bankruptcy protection.

The bankruptcy filing begins a 30-to-90 day period during which the court will determine whether the city is eligible for Chapter 9 and how many creditors will want a piece of the city's limited resources. A city must be insolvent to seek Chapter 9 protection.

But the Detroit Free Press said that time period could be significantly extended if creditors raise a stiff challenge to the city's eligibility.

The city's petition to the court will seek protection from creditors and unions who are negotiating $18.5 billion in debt, the newspaper said.

Kevyn Orr, Detroit's emergency manager, in June proposed a plan to restructure the city's debt and obligations. The Free Press said the plan would leave many creditors with less than they are owed.

Earlier this week, the city's two pension funds filed suit in state court to bar Orr from cutting retiree benefits as part of bankruptcy restructuring. The funds have claims to $9.2 billion in unfunded pension and retiree health care liabilities, the newspaper said.

The Free Press said Michigan Gov. Rick Snyder would have to approve the filing, but a spokeswoman did not immediately return the newspaper's calls.